Below is the text of Mr Major’s response on Balance of Payments, made on 6th April 1989 in the House of Commons.
Dr. Godman To ask the Chancellor of the Exchequer what representations he has received on his Budget forecast for the balance of payments in 1989 and 1990.
The Chief Secretary to the Treasury (Mr. John Major) None, Sir.
Dr. Godman After learning last week’s figures, does the Chief Secretary’s right hon. Friend, the Chancellor of the Exchequer, now predict that the balance of payments deficit for this year will rise or fall?
Mr. Major I see no reason to change the estimate that my right hon. Friend gave some time ago.
Mr. Nicholas Winterton Bearing in mind the answer given by my right hon. Friend the Chancellor to the last questions, does my right hon. Friend the Chief Secretary accept that if interest rates were lower, investment in this country would be higher and that our balance of payments would improve? Does my right hon. Friend agree that interest rates have affected, and will affect, investment, and that investment will have a direct impact on our balance of payments?
Mr. Major What would certainly have a very direct effect on investment would be a failure to take the action necessary to bring down inflation – and that is the purpose of the current short-term interest rate policy. One of the attractive aspects of investment over the past year or two is that so much of it has been made out of retained profits, whereas in previous years and under previous Governments, profits were not there to provide for investment.
Mr. John Smith Has the Chief Secretary seen the international monetary fund’s prediction that the balance of payments deficit for 1989 will reach a record £17 billion? As the Chancellor got it so badly wrong this year, why should we believe his prediction this year as opposed to that of the IMF?
Mr. Major The right hon. and learned Gentleman will recall that the IMF was equally inaccurate last year, as were most other forecasters. The right hon. and learned Gentleman neglects to mention that the IMF report also described the Government’s policies as being entirely appropriate, and it confirmed that our strong fiscal policies support monetary policy and strengthen confidence.
Mr. Beith Would the Government regard it as an achievement if, instead of being £10 billion out with their balance of payments forecast, this year they were only about £6 billion out? Will the Chief Secretary explain why he believes that exports will rise more than twice as fast as imports in order to make his promise come true?
Mr. Major There is no doubt that in recent years exports have been performing extremely well. The reasons why we believe that export performance will continue include the degree of investment and the improved supply-side performance.
Mr. Sumberg As we listen to the views of Opposition Members and hear their policies unfolded, is it not becoming clearer day by day that the Labour party remains the party of high taxation and of higher spending than we can afford, and that it wants to return to the days of public borrowing and public debt?
Mr. Major My hon. Friend describes the situation with precise accuracy.